New York Sees A Surge In Off-Market Luxury Deals
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New York Sees A Surge In Off-Market Luxury Deals

With inventory tight, homes are getting scooped up before the listing is public.

By E.B. Solomont
Fri, Feb 25, 2022 2:03pmGrey Clock 7 min

When billionaire Jacqui Safra hired Nikki Field to sell his New York City penthouse last year, he made a series of demands. Mr. Safra, a descendant of the Lebanese-Brazilian banking family, told the real-estate agent she had three months to quietly drum up interest in the Upper East Side triplex without listing it on the public market, Ms. Field recalled.

There were no professional photos of the Fifth Avenue co-op—just one snapshot of Central Park taken from the terrace—and Ms. Field, of Sotheby’s International Realty, was given access to the apartment for a single day of showings.

Ms. Field said she set the asking price at US$40 million the day before showings took place in May. Seven billionaires came to tour the roughly 7,000-square-foot apartment with a glass conservatory on the top floor, where Mr. Safra had lived for about 30 years. Five made offers, she said, and when she asked for their “best and final” bids, one billionaire offered US$60 million if they could seal the deal within the hour.

They immediately sent out a contract, Ms. Field said, and the buyer signed it and sent it back 30 minutes later with a $6 million deposit. The deal closed in August.

Off-market deals like Mr. Safra’s are fueling a rebound in New York City’s luxury market, which ground to a halt during the pandemic. In 2021, at least five of the top 10 residential real-estate sales in Manhattan took place with no active listing associated with them.

Agents said the approach—common in markets like Los Angeles and the Hamptons—is gaining traction in New York City, and not just in the upper echelon of the market, where private sales have long appealed to discreet buyers and sellers. Across the luxury sector, agents say, sellers are testing the rapidly changing market with whisper listings.

Meanwhile, limited inventory and pent-up demand are pushing buyers to angle for deals where and when they can find them, ushering in a new way of doing business.

“We are matchmaking,” said Clayton Orrigo, a real-estate agent at Compass. Off-market deals typically account for about 4% of his team’s annual sales, he said, but last year that number shot up to 28%.

In addition to Mr. Safra’s sale, recent off-market deals have included billionaire investor Daniel Och’s sale of a Manhattan penthouse and a one-bedroom unit at 220 Central Park South for $188 million, roughly double what he paid just over two years ago, The Wall Street Journal reported.

Joseph Tsai, co-founder of Alibaba and owner of the Brooklyn Nets, paid $157.5 million for two full-floor units and a smaller apartment at the building in another off-market deal last year. And Australian hedge-fund manager Greg Coffey, nicknamed the “Wizard of Oz,” bought an Upper East Side townhouse for $53.5 million in an off-market deal, records show. The seller was New York real-estate developer David Levinson.

Julia Koch, widow of billionaire industrialist David Koch, has been quietly shopping the couple’s 18-room co-op at 740 Park Avenue, seeking around $60 million or more. Earlier this year, a penthouse at 70 Vestry Street was available for $79 million, according to people familiar with the property. The owner is Italian businessman Silvio Scaglia, who recently split from Julia Haart, star of the Netflix reality series “My Unorthodox Life.”

While figures are hard to come by for deals intentionally kept out of the public eye, off-market sales of properties $4 million and up surged more than 75% in 2021 from 2020, and 17.5% from 2019, according to real-estate data analytics firm UrbanDigs. Excluding new development units, which are often intentionally held back, off-market deals $4 million and up rose 96.7% in 2021 from 2020.

Historically, off-market deals in New York were a rarity thanks, in part, to the industry group the Real Estate Board of New York, which discourages whisper listings. “I just don’t think it’s in the best interest of the seller or the buyer,” said Diane Ramirez, chief strategy officer at Berkshire Hathaway HomeServices New York Properties, who is co-chair of Rebny’s residential board. She said the entire market of buyers needs access to a listing for sellers to get the best price in a reasonable amount of time. “When you whisper a listing, you’re eliminating everyone who doesn’t hear the whisper,” she said.

Agents say the transparency of listing sites also has made the market efficient—meaning properties can fetch top dollar when they are offered to the widest possible buyer pool.

The exception has been for the most exclusive properties. Like fine art, homes with unique architecture and design sometimes don’t need mass market-style publicity, said Adam Modlin of Modlin Group. “You know who the collectors are,” he said. “You just call them.”

Last year, Mr. Modlin represented both sides of the deal when Mr. Levinson sold his Upper East Side townhouse to Mr. Coffey. He also brokered the $25.7 million off-market sale of a four-bedroom condo at 160 Leroy Street in downtown Manhattan. The identities of the buyer and seller couldn’t be determined.

Mr. Modlin said discretion and privacy are top priorities for his well-heeled clients, some of whom prefer whisper campaigns to public listings that splash photos of their bedrooms and private living spaces all over the internet. “It does get very personal,” he said.

The phenomenon accelerated during Covid, especially early on, when holding open houses was verboten. Later, sellers rejected the idea of crowds traipsing through their homes, preferring to vet one or two potential buyers. As some New Yorkers moved out of the city, listing properties off-market was a way to sell quietly without broadcasting the decision to business associates or starting the “days on market” clock on listing websites.

In the case of Mr. Safra, for example, Ms. Field said he didn’t want to publicize the listing if it wasn’t going to be successful. “If it was out there and he didn’t sell it,” she said, “he’s got a damaged listing.”

By the middle of last year, New York’s real-estate market had picked up, with luxury sales leading the way. Luxury sales in the fourth quarter of 2021 jumped 87.4% year-to-year and 48.6% from 2019’s fourth quarter. Demand quickly depleted the available inventory, which dropped 7.8% year-to-year in the fourth quarter.

Agents said some sellers are holding back inventory because they are unsure where prices are headed. Meanwhile, buyers are eager to get off the sidelines. Some have scooped up properties before they hit the market. For ultra-high-net-worth buyers and investors, whose wealth often grew during Covid, agents are hunting for off-market properties to generate deal flow.

“A lot of the phone calls I’m getting are from people who have come up short on their search,” said Tal Alexander of Douglas Elliman, who last year brokered an off-market deal for a penthouse at 421 Broome Street in SoHo that sold for a record $49 million about a year after trading for just over $35 million. Mr. Alexander was also involved in the $29 million off-market purchase of pop star Justin Timberlake’s penthouse at 443 Greenwich Street last year, and a $26 million off-market sale at 432 Park Avenue.

Mike Fabbri, an agent at Nest Seekers International, said he is currently shopping a four-bedroom condo on the Upper East Side for between $9 million and $11 million. “With the pandemic, pricing right now is all over the place,” he said. By testing the waters off-market, Mr. Fabbri said he is getting a sense of what buyers would pay before officially listing in the spring. “But if they get an offer at $11 million, they’ll take it and run,” he said, “and we won’t even list it.”

Earlier this year, Kayak co-founder and CEO Steve Hafner and his wife, Staci Hafner, sold their condo at Walker Tower in Chelsea for $23.5 million in an off-market deal. The couple listed the four-bedroom for $24.995 million in November 2020, but Mr. Hafner said they decided to rent it out after relocating to Miami. Halfway through a two-year lease, the tenant, whose identity couldn’t be determined, asked to buy the condo. “We quickly reached an agreement,” Mr. Hafner said. The deal closed in December.

For motivated buyers, paying a premium is worth it to secure a coveted property. Amazon founder Jeff Bezos paid $23 million in July to buy an off-market condo at 212 Fifth Avenue, where he already owns a triplex penthouse and two other units. The seller, Madison Flatiron LLC, paid $18.1 million in 2018, records show.

At lower price points, agents say off-market deals can have a big impact on price. When sellers have the upper hand, buyers may end up overpaying; without multiple bids, sellers risk leaving money on the table.

Developer Robert Kaliner of RoundSquare Builders recently scooped up adjacent townhouses in the West Village in separate off-market deals, paying about $9.3 million for 107 Bank Street and $8.8 million for 105 Bank Street. Mr. Kaliner, in business with his sons, Justin and Jared, said he met the sellers of 107 Bank first, through agents Matthew Lesser, Matthew Pravda and Ravi Kantha of Leslie J. Garfield, who heard they were thinking about selling.

Mr. Kaliner, who plans to combine the buildings into a roughly 40-foot-wide townhouse designed by Robert A.M. Stern Architects, said negotiating a deal off-market kept bidding from getting “excessively high.”

“We got a far better deal on these because they were off-market,” he said.

Gabriel Nussbaum, a filmmaker whose family sold 105 Bank, said he studied neighbourhood comps and felt the price was fair. Mr. Nussbaum, 39, said he has been approached many times about selling the building that his great-grandmother purchased for a few thousand dollars in the 1940s, but the timing was never right. Mr. Nussbaum has been living there for 20 years and said the building was in need of repair. Recently, his family considered renovating, but they were put off by rising construction costs and the time it would take to complete the project.

After Mr. Kaliner bought his neighbour’s home, Mr. Nussbaum asked if the developer wanted to buy his property, too. “I feel like we got a very good price,” he said. “This was definitely the bird in hand.”

Cassie Murdoch, 43, and her husband, Jack Fagan, 51, are hoping to sell their Brooklyn home privately. Prior to Covid, Ms. Murdoch, a digital producer, and Mr. Fagan, a stay-at-home dad, began renovating the Windsor Terrace house they bought for $1.4 million in 2018. The project would have expanded the home into what their agent, Abigail Palanca of Serhant, said would be a roughly $3.6 million property. But after demolishing the interior, their contractor went out of business, and the couple lost their appetite for completing the project. Given the unique circumstances, and since the house isn’t photo-ready, Ms. Palanca advised a whisper marketing campaign to find a buyer.

Barbara Fox of Fox Residential recently sold an approximately 6,000-square-foot apartment on Fifth Avenue for north of $25 million for clients who moved to their country home during Covid. She said the longtime owners preferred a whisper campaign because they didn’t need to sell, weren’t entirely sure if they wanted to sell and didn’t want the world knowing their plans.

The co-op was unofficially on the market for two years, and Ms. Fox said she thinks it might have sold in weeks had she been allowed to blast out the listing far and wide. Still, she said, “they didn’t care.”

 

 



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Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city’s beleaguered economy.

The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.

The move is an attempt to revive a property market that is still one of the most expensive in the world, but that has been badly shaken by social unrest, the fallout of the government’s strict approach to containing Covid-19 and the slowdown of China’s economy . Hong Kong’s high interest rates, which track U.S. rates due to its currency peg,  have increased the pressure .

The decision to ease the tax burden could encourage more buying from people in mainland China, who have been a driving force in Hong Kong’s property market for years. Chinese tycoons, squeezed by problems at home, have  in some cases become forced sellers  of Hong Kong real estate—dealing major damage to the luxury segment.

Hong Kong’s super luxury homes  have lost more than a quarter of their value  since the middle of 2022.

The additional taxes were introduced in a series of announcements starting in 2010, when the government was focused on cooling down soaring home prices that had made Hong Kong one of the world’s least affordable property markets. They are all in the form of stamp duty, a tax imposed on property sales.

“The relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.

The tax cuts will lead to more buying and support prices in the coming months, said Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong, a property consultant. But in the longer term, the market will remain sensitive to the level of interest rates and developers may still need to lower their prices to attract demand thanks to a stockpile of new homes, he said.

Hong Kong’s authorities had already relaxed rules last year to help revive the market, allowing home buyers to pay less upfront when buying certain properties, and cutting by half the taxes for those buying a second property and for home purchases by foreigners. By the end of 2023, the price index for private homes reached a seven-year low, according to Hong Kong’s Rating and Valuation Department.

The city’s monetary authority relaxed mortgage rules further on Wednesday, allowing potential buyers to borrow more for homes valued at around $4 million.

The shares of Hong Kong’s property developers jumped after the announcement, defying a selloff in the wider market. New World Development , Sun Hung Kai Properties and Henderson Land Development were higher in afternoon trading, clawing back some of their losses from a slide in their stock prices this year.

The city’s budget deficit will widen to about $13 billion in the coming fiscal year, which starts on April 1. That is larger than expected, Chan said. Revenues from land sales and leases, an important source of government income, will fall to about $2.5 billion, about $8.4 billion lower than the original estimate and far lower than the previous year, according to Chan.

The sweeping property measures are part of broader plans by Hong Kong’s government to prop up the city amid competition from Singapore and elsewhere. Stringent pandemic controls and anxieties about Beijing’s political crackdown led to  an exodus of local residents and foreigners  from the Asian financial centre.

But tens of thousands of Chinese nationals have arrived in the past year, the result of Hong Kong  rolling out new visa rules aimed at luring talent in 2022.

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